Robot adoption and inflation dynamics

Henrique S. Basso and Omar Rachedi
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Henrique S. Basso: BANCO DE ESPAÑA AND CEMFI
Omar Rachedi: ESADE, UNIVERSITAT RAMON LLULL

No 2536, Working Papers from Banco de España

Abstract: Leveraging variation in robot adoption across U.S. metropolitan areas, we document that automation reduces the sensitivity of inflation to unemployment. To rationalize this finding, we build a New Keynesian model with search frictions in the labor market where robot adoption flattens the Phillips curve. The key channel is the option value of automation: the threat of automating labor tasks alters workers’ effective bargaining power, muting the wage sensitivity to unemployment. We validate the relevance of this channel in the data by showing that robot adoption reduces the sensitivity of inflation to unemployment relatively more in highly unionized metropolitan areas.

Keywords: E24; E31; J31; O33 (search for similar items in EconPapers)
Pages: 126 pages
Date: 2025-09
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2536

DOI: 10.53479/40845

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